Module 5 Session 6

Notes: Project AppraisalSummaryThis session will define project appraisal and introduce dimensions of project appraisal, including issues of socialacceptability/desirability, environmental friendliness, technical feasibility/ appropriateness, gender sensitiveness, economic soundness and ability to be sustainable and most importantly financial viability.

IntroductionProject appraisal is the process of assessing and questioning proposals before resources are committed. It isan essential tool for effective action in community renewal. It’s a means by which partnerships can choose thebest projects to help them achieve what they want for theircommunity. But appraisal has been a source of confusion and difficultyfor projects in the past. Audits of the operation of Single Project Budget schemes have highlighted concerns about the design and operation of project appraisal systems, including: Mechanistic, inflexible systems A lack of independence and objectivity A lack of clear definition of the stages of appraisal

and of responsibility for these stages A lack of documentary evidence after carrying out the

appraisalIt’s no surprise that audits or inspections aren’t impressed with the quality of appraisals, and are specifically found with problems like; Individual appraisals which do not cover the necessary

information or provide only a superficial analysis of the project

Particular problems in dealing with risks, options and value for money

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Appraisals which are considered too onerous/burdensome for smaller projects

Rushed appraisalsProject appraisal is a requirement before funding of programs is done. But tackling problems like those outlined above is about more than getting the systems righton paper. Experience in projects emphasizes the importanceof developing an ‘appraisal culture’ which involves developing the right system for local circumstances and ensuring that everyone involved recognizes the value of project appraisal and has the knowledge and skills necessary to play their part in it.

What can Project Appraisal Deliver?Project appraisal helps project initiators and designers to; Be consistent and objective in choosing projects Make sure their program benefits all sections of the

community, including those from ethnic groups who have been left out in the past

Provide documentation to meet financial and audit requirements and to explain decisions to local people.

Appraisal justifies spending money on a project.

Appraisal asks fundamental questions about whether funding is required and whether a project offers good value for money. It can give confidence that public money is being put to good use, and help identify other funding to supporta project. Getting it right may help a community make its resources go further in meeting local need

Appraisal is an important decision making tool.

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Appraisal involves the comprehensive analysis of a wide range of data, judgments and assumptions, all of which needadequate evidence. This helps ensure that projects selectedfor funding: Will help a partnership achieve its objectives for its

area Are deliverable Involve local people and take proper account of the

needs of people from ethnic minorities and other minority groups

Are sustainable Have sensible ways of managing risk.

Appraisal lays the foundations for delivery.

Appraisal helps ensure that projects will be properly managed, by ensuring appropriate financial and monitoring systems are in place, that there are contingency plans to deal with risks and setting milestones against which progress can be judged.

Getting the system right

The process of project development, appraisal and delivery is complex and partnerships need systems, which suit local circumstances and organization. Good appraisal systems should ensure that: Project application, appraisal and approval functions

are separateAll the necessary information is gathered for appraisal, often as part of project development in which projects willneed support Race/tribal equality and other equality issues are given

proper consideration

Those involved in appraisal have appropriate informationand training and make appropriate use of technical and other expertise

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There are realistic allowances for time involved in project development and appraisal

Decisions are within a implementers’ powers There are appropriate arrangements for very small

projects There are appropriate arrangements for dealing with

novel, contentious or particularly risky projects.

Appraising a project

Key issues in appraising projects include the following. Need, targeting and objectivesThe starting point for appraisal: applicants should providea detailed description of the project, identifying the local need it aims to meet. Appraisal helps show if the project is the right response, and highlight what the project is supposed to do and for whom. Context and connectionsAppraisal should help show that a project is consistent with the objectives of the relevant funding program and with the aims of the local partnership. Are there links between the project and other local programs and projects –does it add something, or compete? ConsultationLocal consultation may help determine priorities and securecommunity consent and ownership. More targeted consultation, with potential project users, may help ensurethat project plans are viable. A key question in appraisal will be whether there has been appropriate consultation andhow it has shaped the project OptionsOptions analysis is concerned with establishing whether there are different ways of achieving objectives. This is a particularly complex part of project appraisal, and one where guidance varies. It is vital though to review different ways of meeting local need and key objectives.

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InputsIt’s important to ensure that all the necessary people and resources are in place to deliver the project. This may mean thinking about funding from various sources and other inputs, such as volunteer help or premises. Appraisal should include the examination of appropriately detailed budgets. Outputs and outcomesDetailed consideration must be given in appraisal to what aproject does and achieves: its outputs and more importantlyits longer-term outcomes. Benefits to neighborhoods and their residents are reflected in the improved quality of life outcomes (jobs, better housing, safety, health and so on), and appraisals consider if these are realistic. But projects also produce outputs, and we need a more realisticview of output forecasts than in the past. Value for moneyThis is one of the key criteria against which projects are appraised. A major concern for government, it is also important for local partnerships and it may be necessary totake local factors, which may affect costs, into account. ImplementationAppraisal will need to scrutinize the practical plans for delivering the project, asking whether staffing will be adequate, the timetable for the work is a realistic one andif the organization delivering the project seems capable ofdoing so. Risk and uncertainty You can’t avoid risk – but you need to make sure you identify risk (is there a risk and if so what is it?), estimate the scale of risk (if there is a risk, is it a bigone?) and evaluate the risk (how much does the risk matter to the project.) There should also be contingency plans inplace to minimize the risk of project failure or of a majorgap between what’s promised and what’s delivered.

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Forward strategiesThe appraisal of forward strategies can be particularly difficult, given inevitable uncertainties about how projects will develop. But is never too soon to start thinking about whether a project should have a fixed life span or, if it is to continue beyond a period of regeneration funding, what support it will need to do so. This is often thought about in terms of other funding but, with an increasing emphasis on mainstream services in neighborhood renewal, appraisal should also consider mainstream links and implications from the first. SustainabilityIn regeneration, sustainability has often been talked aboutsimply in terms of whether a project can be sustained once regeneration funding stops but sustainability has a wider meaning and, under this heading, appraisal should include an assessment of a project’s environmental, social and economic impact, its positive and negative effects. While appraisal will focus detailed attention on each of these areas, none of them can be considered in isolation. Some of them must be clearly linked – for example, a realistic assessment of outputs may be essential to a calculation of value for money. No project will score highly against all these tests and considerations. The final judgment must depend on a balanced consideration of all these important factors.

Checklist for project appraisalWhether you are involved in a partnership with an appraisalsystem in place, or starting to design one from scratch, these questions are worth asking. Are appraisals systematic and disciplined with a clear

sequence of activities and operating rules? Is there an independent assessment of the project by

someone who has not been involved with the development of the project?

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Does the appraisal process culminate in clear recommendations that inform approval (or rejection) of the project?

Is the approval stage clearly separate? Is the appraisal process well documented, with key

documents signed, showing ownership and agreement, and allowing the appraisal documentation to act as a basis for future management, monitoring and evaluation?

Does the appraisal system comply with any relevant government guidance

Are the right people involved at various stages of the process and, if necessary, how can you widen involvement?

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Proposed real life project Appraisal Case Study:

Case study: Building a Pit Latrine with 4 stances at one of the schools in Kasese, Kyabarungira Sub County:This case study is sourced from the New Vision of Monday, August 4th 2003. Summary data of the proposed project:1. Name: Modern Pit Latrine in Kasese District,

Kyabarungira sub county.2. Location: Kyabarungira Sub County3. Proposed goal: Improvement of sanitary conditions in

Kasese suffering from shortage of Latrines.4. Project Execution: School authority, parent

associations, civil society and Kyabarungira sub-county authorities.

5. Financing: School authorities, Kyabarungira sub county council, Kasese District Coucil, Ministry of Education and possibly a donor and international NGOs.

Project description: According to the New Vision text, (seepage 25) shortage of latrines has hit Kasese schools. It isrevealed that Ministry of Education’s policy stipulates onestance for only 25 pupils. In contrast, the current status in Kasese schools is one stance for 120 pupils. This reveals that there is urgent need for about four extra stances for one stance in use.The proposed project is therefore to initially build 4 pit latrines of 30 feet deep, 4 feet wide and 20 feet long with

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For the participants to apply their newly acquired or enhanced project appraisal competencies to a practical casestudy. Namely; building 4ft by 20ft and 30ft deep, with five stances, five doors, five windows, school latrine at one of the schools in Kyabarungira sub county (see New

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5 separate square stances 4*4, 5 doors and 5 windows at oneof the schools in Kyabarungira sub county.

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Project Justification This will immediately improve sanitary conditions at the school, reduce the incidence of terminal sickness and enhance learning conditions at the schools.

Project risksThere are expected to be project risks mainly due to lack of funds, lack of appropriate building skills, bureaucraticcorruption, and interferences from local politicians and there may be lack of space.These aspects are normally presented in a project analysis log frame matrix for a focused appreciation of the main features and their linkages. A typical project log frame matrix is summarized below.

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Table 1. Proposed project Analysis Log frame Matrix

Narrative Summary Verifiable Indicators (OVI)

Means Of Verification (MOV)

Important Assumptions

1. GoalImprovement of sanitary conditions and elimination of total disease in Kasese Schools, Kyabarungira Sub County

Provision ofone stance latrine for only 25 pupils

Progress report by;

School authorities

Parent Association

Kyabarungira sub county

District Council

Availabilityof funds

Available space

Local councils

Education policy compliance

2. Purpose Construction of 4 latrines at one ofthe schools in Kyabarungira sub county

Dimensions of 4 ft wide, 20 ft long and 30 ft deep withfive stanceswith a lockable door and window

Progress and status report

Funds Building

skills Local

politics External

support

1. Output Completion of 7latrines

4 latrines with five stances

Completion report

Respect ofcontractualterms andtiming

2. Activities Hiring

builders Procurement

of materials

Funds availableSpace allocatedMaterials

Completion report

Timely follow-up’

School authorities

County council

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Traininglocal staff

purchased

3. Financing School Contributions Council District Others

Funds available

Progress report Willingness tosupport the project

6. Commissioning 4 modern pitlatrines

Completion report

Official commissioning

Feasibility Study

During the process of project appraisal a feasibility studymay be undertaken to establish the justification of the identified project in all of its relevant dimensions, including its technical design, economic and financial viability, environmental compliance and social acceptability; as well as its conformity with the national development objectives and priorities and the relevant policy, legal and regulatory framework. The aim of a feasibility study is to initially identify the following aspects:

i. Development objectives against which the project proposed conforms

ii. Policy framework and detailed project objectivesiii. Technical soundness of the projectiv. Administrative feasibility of the projectv. The economic and financial viability of the project

proposalvi. The status of demand for the project

beneficiariesvii. Considerations of customs and traditions of

project benefactors, issues of compatibility

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viii. Other important policy and cross cutting issues (gender, environment, HIV/AIDS)

The results of a feasibility study influences decisions to commit or not commit scarce resources to a given project proposalAn important analytical tool that underpins the value of undertaking a feasibility study is the use of production possibility curve. This tool is extremely useful in underscoring the efficient allocation of scarce financial and human resources, as exemplified below by the trade offsbetween production of milk and matooke.The natural resource bases of districts in Uganda are largely in the context of land and human resources. The process of transforming these resources involves a choice in the use of land and human power. In the background of traditional land use with majority of the population largely rural and with very little education, these factorslimit the level of production in the districts. This situation notwithstanding, the government is determined to fight the current high levels of poverty in rural areas through a number of government policies. In particular, poverty reduction policies, UPE and PMA. The implementationof these policies implies making a choice with respect to the use of available land and human resources. A tool known to illustrate the effect of choice in the use of suchresources to bring about the desired change in the social economy is the following Transformation Production Possibility Curve.In other words, a district can choose only to be involved in livestock production, only agricultural products, or to produce both at a certain level of output combination as indicated by the curve below. The curve indicates the unitsthat would be sacrificed if one more units of agricultural products are produced (i.e. the of tradeoffs)The curve illustrates that the economy would be at an optimal level of production when total output is comprised of 7,000 liters of milk and 1,000 tones of matooke. At this

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point, producing one extra litre of milk would cost 0.14 tones of matooke and vice versa. Transformation Production Possibility Curve- Litres of MilkVs Tons of Matooke

Note

1. Production at:a) D represents optimal utilization of available resources b) C is sub-optimal utilization of resources, being inside the production possibility curve c) Z is an impossible case as it is outside the production possibility curve2. Trade offs and Opportunity costs1 litre of milk = 0.14 tons of Matooke1 Ton of Matooke = 7 litres of milkThe curve depicts that the economy would be at an optimal level of production when total output is made of 7000 litres of milk and 1000 tons of Matooke. At this point producing one extra litre of milk would cost 0.14 tons of Matooke and vice versa.

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Project appraisal in relation to technical, economic, financial, social, and environmental analyses; During project appraisal, hard questions will be asked and the answers will determine whether the project proposal will be adopted or rejected. The questions raised will include concerns such as the appropriateness of project objectives, size, scope, implementation methods and modalities, implementation time scale, and the project technical, financial, economic, institutional, environmental, social and distributional justification of the project.A well prepared and assessed project preparation and an appraisal consumes large amounts of data and therefore requires an equipped office with computer facilitation as depicted in the figure below;Figure; A modern office with computer access

(a) Technical analysis Technical analyses of a project is aimed at ensuring the following:

i. To confirm the source of the project proposal, natureof the studies – including feasibility studies undertaken before the proposal, and the nature of decisions taken by all relevant authorities involved

ii. That the problem or the need to be resolved by the project has been clearly stated

iii. That the project has been clearly spelled out with the correct technical design details (such as size, location, timing, and technology)

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iv. That the required materials have been correctly determined and their source identified

v. That the costs of the project have been clearly established, expected product prices projected, and payment modalities and schedules agreed to

(b) Economic AnalysisThe need for economic analysis arises out of the fact that Higher Local Governments (HLGs) operate within limited resources. As a result, some difficult choices of where to commit limited resources from a large pool of deserving andcompeting priorities and needs must be made by HLG officials. The economic costs and benefits of a project areestimated through the application of a cost-benefit analysis, i.e. evaluating both the implicit and social cost-benefits of a project. For profit making projects, profitability tools like Net Present Value, Internal financial rate of return, Pay Back Period and Incremental Profit are used to estimate the viability of the project.

HLGs do not generally operate on profit motivation when considering projects; therefore, social cost-benefit analysis is most applicable for HLGs. In a cost benefit analysis, one must ask basic questions as to what costs andbenefits should directly and indirectly accrue to the target beneficiaries in terms of poverty reductions, enhanced savings, improved medical care, educational, waterand health services.The figure below illustrates the participatory process including especially the beneficiaries of medical, water and sanitation in the design and discussion of project formulation. The participatory process allows for more ideas to be incorporated into the project, and often increases the success of the project.

Figure; Participatory Planning

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(c) Financial Analysis takes a hard look at the funding sources for the project both in terms of completing the project and for its sustained operation. This analysis should question if;

i. The HLG would fund the project from internal resources?

ii. The HLG would fund the project from external resources?

iii. The external resources would be borrowed funds?iv. If the funds are to be borrowed, would the HLG be

able to pay back the loan with accrued interest?v. Would the external resources be a grant from the

central government or from any other source?vi. Would the HLG co-fund the project with an outside

donor, whether it is a central government or another development partner?

vii. Would effective cost recovery mechanisms aimed recouping the project costs be put in place?

viii. Would financial management modalities be put in place to record the transactions during implementation and operation of the project? Documents could include cashbook, assets register, bank statements, balance sheet (accruals accounting),income statements (or receipt and payment schedules),etc

d) Environmental Analysis

Depending on the nature of the project, it is important that the project is seen to comply with the various environmental requirements as administered by the National

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Environmental Management Authority (NEMA). Specifically, the project should comply with the provisions of the National Environment Statute (1995) and the Environmental Impact Assessment (1998). Environmental aspects that projects would have to address include; Public health and occupational safety Control of air, water and land pollution Management of renewable natural resources (plants and

animals) Efficient use of natural resources through multiple use,

recycling and erosion control Conservation of unique habits (forests, game reserves)

for rare species and cultural preservation

Figure; Environmental pollution and degradation

e) Social Analysis

The validity of the planners’ assumptions about the social conditions are tested through social analysis. Where necessary, adjustments should be made so that the project goals are expressed in terms that have more meaning for both the project population and the implementing agencies. Social analysis focuses on four areas indicated below;

i. The social-cultural and demographic characteristics of the project population – its size and social structure, including ethnic, tribal and class composition

ii. How the project population has organized itself to carry out productive activities, including the structure of households and families, availability oflabor, ownership of land, and access to and control of resources

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iii. The project’s cultural acceptability; in other words, its capacity both for adapting to and for bringing about desirable changes in people’s behaviorand in how they perceive their needs

iv. The strategy necessary to elicit commitment from the project population and to ensure their sustained participation from design through to successful implementation, operation and maintenance

The figure below depicts a situation still prevailing in certain areas in Uganda where the girl child is relegated parental duties at an early age while the brother goes to school

Figure showing gender discrimination

f) Cross cutting issues

The above mentioned principles of social analysis are equally relevant in appraising the impact of cross cutting issues, such as HIV/AIDS, environment, and gender issues, on the viability of a project. This is particularly relevant when making sure that the indirect costs and benefits attributable to crosscutting issues are fully articulated and considered in estimating the overall cost benefit of the proposed project.

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